China Top Refineries to up June Crude Runs after Repairs

Top Chinese refineries will increase crude oil processing in June, gaining for a second month after runs sank to a 34-month low in April, a Reuters poll showed, as a resumption of normal operations at two big plants offset moderate cuts in others.

But refinery officials said their operations were still plagued by rigid state fuel price controls and anaemic demand.

The 12 plants, which make up nearly a third of China's capacity and are located mostly in coastal areas, plan to process 2.92 million barrels per day (bpd) of crude oil this month, the poll showed.

The daily rate, which accounts for about 85 percent of their refining capacity, is expected to be 4.3 percent higher than the actual 2.80 million bpd in May.

Crude throughput at Zhenhai, China Petroleum and Chemical Corp's (Sinopec Corp) largest plant, will jump about 40 percent on month as it completed the turnaround of a 200,000-bpd crude oil unit in mid May.

Crude runs at PetroChina's largest Dalian refinery will gain 9 percent from May as it finished maintenance at a 120,000-bpd crude unit and a 3 million tonne-per-year fluid catalytic cracking (FCC) unit last month.

But operation in several other plants will be scaled down slightly from May amid an expected fuel price cut, mounting fuel stockpiles and weakening demand.

"Refiners have a difficult time to recoup crude cost if oil prices are in a downward spiral," said one plant official.

"While you are still processing costly crude bought two months ago, domestic fuel prices have been cut to reflect crude price falls in the past month."

Chinais expected to lower gasoline and diesel prices for a second time this year, and the cut could be the biggest since 2009 as crude oil prices that the government tracks may have fallen by nearly 10 percent by Friday.

The government would consider changing fuel prices if the 22-day weighted moving average of international oil prices rises or falls 4 percent, but it has never disclosed daily calculations.

The weighted moving average of oil prices that China uses was 8.4 percent lower on June 5 than the level on May 8, according to consultancy C1 Energy.

China's fuel oil stocks fell only slightly in April even though crude oil processing dropped to the lowest level since October, signalling weakening fuel demand in the world's second largest economy as it was heading into its sixth quarter of slowing growth.

Reuters calculations showed China's implied oil demand in April dropped to a six-month low and posted its first yearly decline in at least three years. PLANT JUNE RUNS MAY RUNS REFINING CAPACITY (Reuters, Edited by Topco)